U.S. Department of Commerce 

Office of Inspector General 

Semiannual Report to Congress 

September 2012 
OFFICE OF 

INSPECTOR GENERAL 

Inspector General 

Deputy 

Inspector General Offi ce of 

Administration 

Office of Audit 

and Evaluation 

Offi ce of 

Investigations 

Office of Counsel 

Oversight Areas 

Office of the Secretary 

Bureau of Economic Analysis 

Bureau of Industry and Security 

U.S. Census Bureau 

Economic Development Administration 

Economics and Statistics Administration 

International Trade Administration 

Minority Business Development Agency 

National Institute of Standards and Technology 

National Oceanic and Atmospheric Administration 

National Technical Information Service 

National Telecommunications and 

Information Administration 

U.S. Patent and Trademark Office 

OIG Main Number 

Inspector General . . . . . . . . . . . . . . . . . . . . . . . . . . .202.482.4661 

OIG Hotline 

Telephone . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .202.482.2495 

or 800.424.5197 

TDD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .202.482.5923 

or 800.854.8407 

E-mail . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .hotline@oig.doc.gov 

More Information 

Visit www.oig.doc.gov to learn more about our activities, 

download reports and testimony, and subscribe to 

our RSS feed for website updates. E-mail website 

comments to oigweb@oig.doc.gov. 
U.S. Department of Commerce 

Office of Inspector General 

Semiannual Report to Congress
 

September 2012 
d Office of Inspector General | Semiannual Report to Congress | September 2012

 

 

 

 

 

 

TABLE OF 


CONTENTS
 

01 FROM THE INSPECTOR GENERAL 

02 TOP MANAGEMENT CHALLENGES FACING THE DEPARTMENT 

06 OVERSIGHT AREAS 

06 DEPARTMENT-WIDE MANAGEMENT 

10 ECONOMIC DEVELOPMENT ADMINISTRATION 

12 ECONOMICS AND STATISTICS ADMINISTRATION 

16 INTERNATIONAL TRADE ADMINISTRATION 

18 NATIONAL INSTITUTE OF STANDARDS AND TECHNOLOGY 

20 NATIONAL OCEANIC AND ATMOSPHERIC ADMINISTRATION 

24 NATIONAL TELECOMMUNICATIONS AND INFORMATION ADMINISTRATION 

26 UNITED STATES PATENT AND TRADEMARK OFFICE 

30 AMERICAN RECOVERY AND REINVESTMENT ACT 

NATIONAL INSTITUTE OF STANDARDS AND TECHNOLOGY

 NATIONAL TELECOMMUNICATIONS AND INFORMATION ADMINISTRATION 

36 WORK IN PROGRESS 

40 STATISTICAL DATA 

50 REPORTING REQUIREMENTS 

52 ACRONYMS AND ABBREVIATIONS 
1 

FROM THE 

INSPECTOR GENERAL 

I am pleased to present the Department of Commerce Office of Inspector General’s 

Semiannual Report to Congress for the 6 months ending September 30, 2012. 

This report summarizes work we initiated and completed during this semiannual 

period on a number of critical departmental activities. Over the past 6 months, our 

office issued 11 audit and evaluation reports addressing programs overseen by 

the Economics and Statistics Administration, International Trade Administration, 

National Institute of Standards and Technology, National Oceanic and Atmospheric 

Administration, National Telecommunications and Information Administration, United 

States Patent and Trademark Office, and the Department itself. 

During the final months of this reporting period, we initiated our annual review to 

identify the top management challenges facing the Department in fiscal year 2013, 

a summary of which appears on page 2. These challenges will be issued in a 

separate report and included in the Department’s November 2012 Performance and 

Accountability Report and the March 2013 Semiannual Report to Congress. We 

will work closely with the Department and with Congress in the months ahead to 

meet these and other challenges facing Commerce as it fulfills its complex mission. 

We thank former Secretary John Bryson, Acting Secretary Rebecca Blank, senior 

officials throughout the Department, and members of Congress and their staffs for 

their support of our work during this reporting period and for their receptiveness to 

our recommendations for improving Commerce programs and operations. 

TODD J. ZINSER
 
 

 

2 Office of Inspector General | Semiannual Report to Congress | September 2012 

T OP MANAGEMENT 

CHALLENGES FACING 

THE DEPARTMENT 

The Reports Consolidation Act of 2000 requires inspectors general at major 

departments to issue an annual report highlighting what they consider, from 

their oversight perspective, the most significant management challenges 

facing their departments. On May 31, 2012, OIG issued to the Department 

and its agencies a memorandum that previewed what OIG would discuss 

in further detail in the upcoming fiscal year (FY) 2013 Top Management 

Challenges Facing the Department of Commerce report. On September 28, 

2012, OIG issued the draft FY 2013 Top Management Challenges Facing 

the Department of Commerce report to the Acting Secretary for response. 

We identified five major challenges that represent cross-cutting issues 

with a focus on the President’s most important goals and longstanding 

departmental management concerns. 

1. STIMULATE ECONOMIC GROWTH IN KEY INDUSTRIES, INCREASE EXPORTS, 

AND ENHANCE STEWARDSHIP OF MARINE FISHERIES 

The Department is at the center of the federal government’s efforts to stimulate economic and 

job growth in key industries and promote exports, while at the same time regulating exports 

and maintaining the delicate balance between promoting and regulating the commercial use 

of marine fisheries. These efforts require the Department to work effectively with interagency 

partners and the private sector as well as to marshal and integrate Commerce resources. We 

have identified three areas for management attention: 

• stimulate economic growth in manufacturing, intellectual property, and wireless industries 

• promote and regulate exports 

• protect and promote marine fisheries 

2. INCREASE OVERSIGHT OF RESOURCES ENTRUSTED BY THE PUBLIC AND 

INVEST FOR LONG-TERM BENEFITS 

The Joint Select Committee on Deficit Reduction was tasked with seeking $1.5 trillion in 

government-wide savings over the next 10 years. The Committee did not agree on spending 

reductions, resulting in a potential sequestration that will trigger across-the-board budget cuts 

beginning in January 2013. Departmental programs will be deeply affected. As the Department 

prepares for this extended period of tighter budgets and decreased spending, it is more 

important than ever to understand the risks associated with making trade-offs in allocating 

resources between the implementation of programs and the oversight of those programs. 
 

 

Top Management Challenges Facing the Department 3 

Also, after experiencing significant cost increases in the last decennial (from $8.2 billion to 

$12.8 billion between 2000 and 2010 decennials), the Census Bureau—a Departmental 

component—has vowed to contain cost of the 2020 decennial by making critical design 

decisions by the end of FY 2014. However, it has already encountered significant challenges 

in achieving this goal. While the nation is facing significant financial hardship, the Department 

and Census Bureau simply cannot afford to repeat the cost growth experienced over prior 

decennials. We have identified three areas for management attention during a period of funding 

uncertainty: 

• 	 increase internal controls and oversight of Departmental operations under a 

constrained budget 

• 	 invest for efficiencies and long-term benefits 

• 	 implement bold design changes to contain 2020 decennial costs while maintaining 

enumeration quality 

3. 	STRENGTHEN SECURITY AND INVESTMENTS IN INFORMATION TECHNOLOGY 

In FY 2012, the Department planned to invest $2.4 billion in IT. This is about 25 percent of its 

annual budget and one of the highest percentages devoted to IT among all civilian agencies. 

The Department and its constituent bureaus rely on IT to support major mission activities, such 

as producing the constitutionally mandated decennial census; releasing vital economic statistics 

(e.g., the gross domestic product and consumer spending); granting patents and trademarks; 

issuing severe weather alerts; and operating weather satellites. However, we have identified 

major concerns in the Department’s IT security posture and fragmented IT governance. While 

the Department’s Chief Information Officer has taken steps to strengthen IT governance, we 

continue to find significant security vulnerabilities in bureau systems, which could lead, and 

already have led, to service disruptions and loss of sensitive information. We have identified four 

areas for management attention: 

• 	 continue improving the Department’s IT security posture by addressing persistent security 

weaknesses 

• 	 develop resilient incident response and recovery capabilities with increased monitoring of 

Internet traffic 

• 	 manage the Department’s IT portfolio with enhanced governance structure 

• 	 strengthen oversight of IT investments 

4. 	IMPLEMENT FRAMEWORK FOR ACQUISITION PROJECT MANAGEMENT AND 

IMPROVE CONTRACTS OVERSIGHT 

In FY 2011, the Department obligated approximately $2.4 billion on contracts for goods and 

services, including satellite acquisitions, intellectual property protection, broadband technology 

opportunities, management of coastal and ocean resources, information technology, and 

construction and facilities management. To maximize these funds, the Department needs 

to strengthen its acquisition and contract management practices. While it has made some 

progress—such as reorganizing the Office of Acquisition Management to more directly address 

major acquisition initiatives and implementing an Acquisition Center of Excellence, which will 

consolidate acquisition support for the Department’s smaller bureaus, our audits continue to find 

weaknesses in how the Department plans, administers, and oversees its contracts. We have 

identified four areas for management attention: 
4 Office of Inspector General | Semiannual Report to Congress | September 2012 

• implementing the planned framework for acquisition project management 

• overseeing high-risk contracts 

• maintaining an acquisition workforce that holds bureau officials accountable 

• implementing an effective suspension and debarment program 

5. REDUCE RISKS OF COST OVERRUNS, SCHEDULE DELAYS, AND COVERAGE 

GAPS FOR NOAA’S SATELLITE PROGRAMS 

Managing risks in the acquisition and development of the next generation of environmental 

satellites is a continuing challenge for the Department. The two most prominent programs, the 

Joint Polar Satellite System (JPSS) and the Geostationary Operational Environmental Satellite-R 

series (GOES-R), together account for one-third of NOAA’s FY 2013 budget request. They 

are also the largest investments in the Department, comprising nearly 20 percent of the 

Department’s budget. The satellites will provide data and imagery for weather forecasting— 

including severe-storm tracking and alerting—and the study of climate change. Operating 

environmental satellites and weather forecasting are designated as primary mission-essential 

functions of the Department because they help lead and sustain the nation in the event of a 

catastrophe. Yet, because of cost overruns, schedule delays, and the aging of NOAA’s current 

constellation of satellites, NOAA is confronting coverage gaps for these critical assets. 

Strong program management and close oversight of these programs are needed to manage 

risks that inevitably lead to cost overruns, schedule delays, and coverage gaps for the critical 

capabilities these programs will provide. Based on our work with these programs, we have 

identified four areas for management attention: 

• communicating with stakeholders to define JPSS capabilities, schedule, and cost baselines 

• ensuring adequate leadership and governance structure over JPSS development 

• developing a plan to support NOAA weather forecasting capabilities during coverage gaps 

• reducing program risks associated with GOES-R development 

6 Office of Inspector General | Semiannual Report to Congress | September 2012

DEPARTMENT-WIDE MANAGEMENT
 

The U.S. Department of Commerce works to help American 

companies become more innovative and successful at home and more 

competitive abroad. It creates the conditions for economic growth and 

opportunity by promoting innovation, entrepreneurship, competitiveness, 

and stewardship. 

The Department accomplishes its mission by providing national and 

local weather services; developing key economic and demographic data 

(including the decennial census); advancing technological and scientific 

innovation; protecting and restoring environmental resources; promoting 

international trade; and supporting local, regional, and national economic 

development. These activities affect U.S. business and industry daily and 

play a critical role in the nation’s economic well-being. 
7 

Recovery Act a

ESA b

NOAA

Department-wide

EDA

ITA

NTIA

PTO 

5 

4 

3 

2 

1 1 1 1 

Department-Wide Management 

COMPLETED WORKS (BY OVERSIGHT AREA) 

During this reporting period, OIG completed 19 audits and evaluations and 2 congressional 

testimonies. 

a Of the 5 Recovery Act-related works, 1 was a Department-wide project; 2 concerned NTIA; 1 was IG testimony; 

and 1 concerned NIST. b The ESA completed works concern the Census Bureau. 

NONFEDERAL AUDIT RESULTS FOR THE 6-MONTH PERIOD ENDING JUNE 30, 2012 

(OIG-12-034-M) 

Nonfederal entities (states, local governments, tribes, colleges and universities, and nonprofit 

organizations) that expend $500,000 or more in a year of federal awards are required by the 

Single Audit Act of 1984, and Amendments of 1996, to have an annual audit of their federal 

awards. During the 6-month period ending June 30, 2012, OIG reviewed 176 reports by 

recipients of grants from EDA, ITA, NIST, NOAA, NTIA, and multiple bureaus. We identified 

approximately $784,000 in questioned costs in these single audits. Our report contained 

an analysis of findings identified in single audit reports, noted trends in the types of findings 

reported, and summarized findings by Departmental program. 

Commercial organizations that receive federal funds from the Department are subject to award 

requirements as stipulated in the award document. If an award does not have specific audit 

guidelines incorporated into the award, OIG auditors follow the requirements for a programspecific audit as described in Office of Management and Budget (OMB) Circular A-133, Audits 

of States, Local Governments, and Non-Profit Organizations, section 235. During the reporting 

period, OIG analyzed 114 audits submitted for awards to commercial and other organizations 

for NTIA’s Broadband Technology Opportunities Program (BTOP), NIST’s Advanced Technology 

Program (ATP), and NIST’s Technology Innovation Program (TIP). We identified approximately 

$426,028 in questioned costs for these program-specific audits. 
8 Office of Inspector General | Semiannual Report to Congress | September 2012 

AUDITS OF COMMERCE FUND RECIPIENTS BY INDEPENDENT AUDITORS 

(REVIEWED BY OIG DURING THE 6 MONTHS ENDING SEPTEMBER 30, 2012) 

In addition to undergoing OIG-performed audits, certain recipients of Department of Commerce 

financial assistance are periodically examined by state and local government auditors and 

by independent public accountants. OMB Circular A-133, sets forth audit requirements for 

most of these audits. For-profit organizations, including those that receive TIP funds, are 

audited in accordance with Government Auditing Standards. In addition, organizations that 

received ATP funds are audited in accordance with NIST Program-Specific Audit Guidelines 

for ATP Cooperative Agreements, and organizations that received BTOP funds are audited 

in accordance with the Program-Specific Audit Guidelines for the Broadband Technology 

Opportunities Program, issued by the Department. 

We examined 188 audit reports during this semiannual period to determine whether they 

contained audit findings related to Departmental programs. For 110 of these reports, the 

Department acts as an oversight agency and monitors the audited entity’s compliance with OMB 

Circular A-133, Government Auditing Standards, or program-specific reporting requirements. 

The other 78 reports cover entities for which other federal agencies have oversight responsibility. 

We identified 22 reports with material findings related to the Department. 

Report Category OMB A-133 Audits Program-Specifi c Total
 

Audits
 

Pending Review (April 1, 2012) 16 37 53 

Received 132 28 160 

Examined 125 63 188 

Pending Review 23 2 25 

(September 30, 2012) 

The following table shows a breakdown by bureau of approximately $914 million in Commerce 

funds audited. 

Agency Funds 

Economic Development Administration $ 26,377,193 

Minority Business Development Agency 247,860 

National Institute of Standards and Technologya 69,837,826 

National Oceanic and Atmospheric Administration 56,071,052 

National Telecommunications and Information Administrationb 130,926,994 

Multi-bureau 630,481,696 

Total $913,942,621 

a Includes $58,423,894 in program-specific audits; A-133 audits account for the remaining amount of $11,413,932. 

b Includes $45,299,457 in program-specific audits; A-133 audits account for the remaining amount of $85,627,537. 

We identified a total of $2,290,668 in the federal share of questioned costs and $213,758 in 

funds to be put to better use. In most reports, the subject programs were not considered major 
 

Department-Wide Management 9 

programs; thus, the audits involved limited transaction and compliance testing against laws, 

regulations, and grant terms and conditions. The 22 reports with Departmental findings are listed 

in table 7-a on page 48. 

BODY ARMOR MANUFACTURER SETTLES IN DEFECTIVE MERCHANDISE CASE 

In April 2012, two former executives of Second Chance Body Armor, Inc., (SCBA) agreed 

to pay $50,000 each to settle individual civil claims brought by the government as the result 

of an investigation into the manufacture and sale of bulletproof vests containing Zylon. In July 

2012, the U.S. Bankruptcy Court, Western District of Michigan, ordered SCBA Liquidation, 

Inc., (formerly known as SCBA) to pay $3,564,883.84 to settle civil claims brought against 

SCBA by the government as part of this same investigation. These settlements are part of a 

larger investigation of the body armor industry’s use of Zylon ballistic material in body armor. 

The companies manufactured and sold Zylon bulletproof vests despite possessing information 

showing that the Zylon materials degraded quickly over time and were not suitable for ballistic 

use. The SCBA vests were purchased by the federal government and by various state, local, 

and tribal law enforcement agencies that were partially reimbursed by the United States under 

the U.S. Department of Justice’s (DOJ’s) Bulletproof Vest Partnership Grant Program. This 

settlement was the result of a joint investigation involving DOJ and investigative units from our 

office and eight other federal departments and agencies. Our office coordinated with NIST 

scientists for expert support at various phases of this investigation. 

ADDITIONAL MULTIMILLION DOLLAR GUILTY PLEAS IN PRICE-FIXING CASE 

In September 2012, Yamato Global Logistics Japan Co. entered into a plea agreement in which 

it agreed to pay a criminal fine of $2,326,774 and agreed to cooperate with the ongoing antitrust 

investigation. Still subject to court approval, this agreement is the latest of several previously 

reported (September 2011, page 9; March 2012, page 23) that resulted from an investigation 

into Sherman Antitrust Act violations, in which companies conspired to fix certain fees in the 

provision of freight forwarding services for air cargo shipments from Europe to the United States 

between 2002 and 2007. 

In November 2011, four companies—EGL Inc., Geologistics, Kuhne Nagel, and Panalpina—had 

their plea agreements accepted by a federal judge. The four agreed to pay criminal fines totaling 

$26,986,969 and special assessments totaling $4,400. In December 2011, two additional 

companies—BAX Global and Schenker AG, Inc.—had their plea agreements accepted by a 

federal judge and agreed to pay criminal fines totaling $23,281,441 and special assessments 

totaling $2,400. All of these plea agreements were the result of an ongoing joint investigation 

into the freight forwarding industry by the DOJ’s Antitrust Division–National Criminal Enforcement 

Section, the Federal Bureau of Investigation’s (FBI’s) Washington field office, and our office. 

FORMER HUMAN RESOURCE EMPLOYEES CONSPIRED TO AVOID WAGE 

GARNISHMENT 

Two former Office of Human Resources Management (OHRM) employees conspired to avoid 

a judicially ordered wage garnishment of one of the employees. Our investigation found that 

one of the employees intercepted and diverted agency notification of the garnishment to the 

employee who was the subject of the garnishment. That employee then created a fraudulent 

letter on agency letterhead stating the employee was no longer employed by the Department 

and submitted it to the collection agency. During interviews, both employees admitted their 

misconduct. One of the employees resigned and the other was terminated. 
10 Office of Inspector General | Semiannual Report to Congress | September 2012 

ECONOMIC DEVELOPMENT 

ADMINISTRATION 

The U.S. Economic Development Administration’s mission is to 

lead the federal economic development agenda by promoting innovation 

and competitiveness, preparing American regions for growth and 

success in the worldwide economy. Its investment policy is designed 

to establish a foundation for sustainable job growth and the building 

of durable regional economies throughout the United States. This 

foundation builds upon two key economic drivers, innovation and 

regional collaboration. 
Economic Development Administration 11 

REVIEW OF TRADE ADJUSTMENT ASSISTANCE CENTER (TAAC) ADMINISTRATION 

COSTS (OIG-12-025-M) 

We provided the House and Senate Committees on Appropriations with information on the 

reasonableness of administrative costs charged by TAACs as part of the Trade Adjustment 

Assistance for Firms program administered by EDA. The information was requested in the 

House Committee Report that accompanied the FY 2012 Commerce, Justice, Science, and 

Related Agencies Appropriations bill. The TAA program exists to provide technical assistance to 

U.S. firms experiencing a decline in sales and employment, resulting in part from an increase in 

imports of like or directly competitive articles, so that they may become more competitive in the 

global marketplace. 

As part of the review, we obtained the most recent available expenditure data from 3 of the 

11 TAACs: New England, New York State, and Western. Our review focused on the use of 

federal funds provided by EDA and was limited to an analysis and comparison of expenses 

among the TAACs as well as interviews with EDA staff. 

We did not determine that the level of administrative costs of the three TAACs were 

unreasonable, based on our recalculations of EDA-provided data. However, we noted that 

EDA cannot readily determine the true TAAC program activity costs. Improved and more 

consistent tracking of expenses by activity from the TAACs would allow EDA to better monitor 

the composition of expenses for each TAAC and determine whether they are reasonable. We 

also noted that EDA has not considered options beyond existing TAACs for executing the TAA 

program. EDA should periodically determine whether there are other organizations that can 

achieve the program’s desired results more efficiently or effectively. 
12 Office of Inspector General | Semiannual Report to Congress | September 2012

ECONOMICS AND STATISTICS 

ADMINISTRATION 

The Economics and Statistics Administration analyzes economic 

activity, formulates policy options, and produces a major share of the 

U.S. government’s economic and demographic statistics. ESA has one 

constituent operating unit and two primary operating units: 

Office of the Chief Economist—Provides the Department with 

expertise on key economic forces affecting the U.S. economy, 

delivering timely, relevant, and credible economic analysis and advice to 

government leaders and the public. 

Census Bureau—Publishes a wide variety of statistical data about the 

nation’s people and economy, conducting approximately 200 annual 

surveys in addition to the decennial census of the U.S. population and 

the quinquennial census of industry. 

Bureau of Economic Analysis—Prepares, develops, and interprets 

national income and product accounts (summarized by the gross 

domestic product), as well as aggregate measures of international, 

regional, and state economic activity. 
 

Economics and Statistics Administration 13 

2020 CENSUS PLANNING: DELAYS WITH 2010 CENSUS RESEARCH STUDIES MAY 

ADVERSELY IMPACT THE 2020 DECENNIAL CENSUS (OIG-12-023-I) 

For the 2020 Census, the Census Bureau has reorganized to improve its research and testing, as 

well as develop more cost-effective program processes and methods. (See figure below for 2020 

Census research tracks.) The Bureau is also working to improve its cost estimation process for the 

next decennial census; it will update estimates as research and testing progress, so that budget 

requests align with decennial census requirements. 

The Census Bureau recognizes that it must fundamentally change its decennial design to improve the 

enumeration quality of the 2020 Census and contain life cycle costs. More specifically, the Bureau 

should reassess how it updates its address list, enumerates households, and utilizes field and IT 

infrastructure in this critical effort. The Census Program Evaluation Five Major Research Tracks and Experiments (CPEX) program provides lessons learned for the 2020 Census Design from the previous decennial that inform the next design; however, 

delays in the completion of 2010 CPEX studies could adversely 

impact its effort to improve the 2020 Census. Further, the 2020 

Census requires a comprehensive risk management plan, which 

the Bureau is working to finalize and integrate with its enterprise 

risk management program and the Department’s risk management 

efforts, including reviews of IT and non-IT major programs. 

We recommended to the director of the Census Bureau the 

following actions (which, since December 2011, the Bureau has 

already begun implementing): 

• 	 prioritize further the 2010 CPEX studies, and focus program 

resources, to ensure that the most critical studies affecting the 

cost and quality of the 2020 Census are completed; and 

• 	 improve the transparency of the 2010 CPEX program by 

posting study plans, expected publication dates for the 109 

studies, and final reports online as soon as practicable so that 

stakeholders can review and monitor the Bureau’s progress in 

redesigning the 2020 Census. Source: U.S. Census Bureau 

2012 

Census 

Design 

Expanded, 

Automated, 

and Tailored 

Response 

Reengineered 

Information 

Technology 

Infrastructure 

Using 

Administrative 

Continual 

Records for 

Non-response 

Frame 

Address 

Updating 

Reengineered 

Field 

Infrastructure 

HIGH-QUALITY MAPS AND ACCURATE ADDRESSES ARE NEEDED TO ACHIEVE 

CENSUS 2020 COST-SAVING GOALS (OIG-12-024-I) 

The Census Bureau maintains a database containing a complete list of all living quarters (the 

master address file, or MAF) and geospatial data (the topologically integrated geographic 

encoding and referencing system, or TIGER) of the nation to use in all demographic and 

decennial programs. The Bureau’s method of collecting and tabulating decennial census data is 

to link (geocode) MAF addresses to TIGER. 

The 2010 geographic initiative’s efforts to produce an adequate measure to assess MAF/TIGER 

database (MTdb) quality fell short. In addition, the program’s goal of updating address and 

map information from tribal, state, county, and local government partners was not fully realized. 

Both of these goals must be met to implement a 2020 decennial census address canvassing 

operation with reduced costs. 
14 Office of Inspector General | Semiannual Report to Congress | September 2012 

We recommended that the Census Bureau 

• 	 develop an MTdb measure for determining address list quality at a low level of geography 

that (a) provides a fair and equal opportunity for targeting selection, (b) drives selection and 

planning decisions, and (c) is well-documented and verifiable; 

• 	 work with the Department to determine the feasibility of improving methods of sharing MTdb 

information throughout the decade with governmental entities (partners) to create a uniform, 

national address list; 

• 	 investigate and remedy the exclusion of 500,000 ungeocoded address records, which had 

been designated as valid U.S. Postal Service delivery addresses, from the 2010 Census; 

• 	 conduct the necessary research, develop a proven methodology, and allocate the necessary 

funds to continuously reduce the number of ungeocoded records throughout the decade; 

and 

• 	 develop and implement quality indicator tools, including use of administrative records, to 

ensure that updates to the MAF are accurate. 

CONGRESSIONAL TESTIMONY (OIG-12-030-T) 

“The next decennial calls for new design 

elements and meticulous planning and 	 On July 18, 2012, the Inspector General testified about lessons 

learned from the 2010 decennial and methods the Census testing—along with unprecedented Bureau could employ to design a cost-effective and accurate transparency on the part of the Bureau, enumeration in 2020. His testimony focused on three areas:

including early and continuous 	 important challenges encountered during the 2010 decennial; 

engagement with key stakeholders.”	 changes the Census Bureau and its stakeholders expect to 

improve the 2020 decennial; and key issues for the Bureau, the 

Department, and Congress to consider as the Bureau works to IG testimony before a Senate Homeland Security and bring about these changes. Governmental Affairs Subcommittee, July 18, 2012 

The Inspector General also recommended that Congress apply 

early and sustained attention to the Bureau’s development of 

design alternatives, adaptation of strategy, and development of budgets to support the 2020 

decennial. This attention includes monitoring program developments, developing any necessary 

legislation to enable a reengineered census, and support for early and mid-decade research and 

testing requirements. Without this attention and oversight, he said that there will be significantly 

greater risk to the Bureau’s ability to contain costs. 

LETTER TO THE SENATE APPROPRIATIONS SUBCOMMITTEE REGARDING THE 

AMERICAN COMMUNITY SURVEY (OIG-12-033-M) 

On August 20, 2012, OIG addressed the chair and ranking member of the Subcommittee on 

Commerce, Justice, Science, and Related Agencies, who had requested (a) the status of 2020 

decennial census planning and (b) OIG insight on the impact of recent proposals concerning the 

Census Bureau’s American Community Survey (ACS) program. The letter expanded on highlights 

of the Inspector General’s July 18, 2012, testimony before the Senate Subcommittee on Federal 

Financial Management, Government Information, Federal Services, and International Security 

about planning for the 2020 Census. 

Regarding the status of 2020 decennial planning, OIG reiterated challenges that complicated the 

2010 decennial and call for fundamental changes to 2020 planning and execution: 
Economics and Statistics Administration 15 

• 	 Departmental oversight, especially concerning the Census Bureau’s data collection and IT 

infrastructure projects 

• 	 decennial planning within a constrained budget, which makes providing the Department and 

Congress reliable and transparent budget requests a top Census Bureau priority 

• 	 maintaining continuity of leadership over the long decennial planning cycle 

• 	 modernizing the 2020 decennial, to make the census more cost-effective 

Regarding the ACS, OIG highlighted relevant recommendations from its June 27, 2011, final 

quarterly report to Congress on the 2010 Census. Since the ACS has replaced the longform decennial survey, OIG suggested that the Census Bureau use the ACS to test content 

and design, response options (such as the Internet), administrative records use, and new 

data collection procedures and methodologies. OIG also recommended leveraging ACS and 

other Bureau survey operations to facilitate the introduction of new technologies for the 2020 

decennial. Eliminating the ACS would have a significant impact on important local and federal 

programs. If ACS data are no longer collected, Congress will need to address (a) what federally 

collected information will be available for businesses, governments, and other users; (b) whether 

the long form will need to be reinstated for the next decennial census; and (c) whether reliable 

estimates could be created from other data sources. If the ACS becomes voluntary, the survey 

would result in lower-quality data and likely experience increased production costs. OIG hopes 

that these recommendations and findings provide additional insight and direction for the future of 

the decennial census and the ACS. 

FORMER CENSUS BUREAU EMPLOYEE SENTENCED TO 23 YEARS FOR 

ATTEMPTED MURDER 

In June 2012, a Census Bureau employee was sentenced to 23 years in state prison for the 

attempted murder of the husband of another Bureau employee. Our investigation found the 

former employee used Bureau computers to facilitate a complex scheme to make the planned 

murder appear to be a suicide. We provided substantial support, in the form of computer 

forensics requested by the Montgomery County Police Department, and testified at the trial. The 

former employee was terminated by the Bureau in July 2012. 
16 Office of Inspector General | Semiannual Report to Congress | September 2012

INTERNATIONAL TRADE 

ADMINISTRATION 

The International Trade Administration strengthens the 

competitiveness of U.S. industry, promotes trade and investment, and 

ensures fair trade through the rigorous enforcement of our trade laws 

and agreements. ITA works to improve the global business environment 

and helps U.S. organizations compete at home and abroad. ITA is 

organized into four distinct but complementary business units: 

U.S. and Foreign Commercial Service—Promotes U.S. exports, 

particularly by small- and medium-sized enterprises, and provides 

commercial diplomacy support for U.S. business interests around the 

world. 

Manufacturing and Services—Strengthens U.S. competitiveness 

abroad by helping shape industry-specific trade policy. 

Market Access and Compliance—Assists U.S. companies 

and helps create trade opportunities through the removal of market 

access barriers. 

Import Administration—Enforces U.S. trade laws and agreements 

to prevent unfairly traded imports and to safeguard the competitive 

strength of U.S. businesses. 
 

International Trade Administration 17 

IMPROVEMENTS ARE NEEDED TO STRENGTHEN ITA’S 

INFORMATION TECHNOLOGY SECURITY PROGRAM 

(OIG-12-037-A) 

To fulfill its critical missions, ITA heavily relies on information 

technology, particularly the Internet, to conduct its business, 

and inevitably faces greater cybersecurity risks. In recent years, 

ITA has become a frequent target of cyber attacks. In order to 

minimize the serious damage caused by cyber attacks, ITA has 

taken action such as consolidating Internet access through a 

centralized service. 

Our FISMA audit found weaknesses in the six ITA systems we 

reviewed, including inadequate security categorization that 

may affect protection against critical information and security 

control deficiencies that increase the likelihood of a successful 

cyber attack. The security control deficiencies included (a) 

deficiencies with vulnerability scanning and patch management, 

(b) weaknesses in securing databases, (c) the presence of 

unauthorized software and use of unauthorized removable media, 

and (d) risks related to network implementation. 

We recommended that the Under Secretary of Commerce for International Trade 

• 	 ensure that system owners and appropriate ITA officials collaborate to identify and categorize 

all information processed, stored, or transmitted by each system and categorize each system 

accordingly; 

• 	 mitigate the remaining vulnerabilities identified by our vulnerability scan assessments; 

• 	 improve the patch management process by making timely patches for all software products 

and coordinating within ITA to comprehensively identify and remediate software flaws in a 

timely manner; 

• 	 address and fully implement critical security settings in database configuration checklists; 

• 	 ensure that only authorized software and USB devices are used on both servers and 

workstations; and 

• 	 strengthen the worldwide enterprise network’s security posture by reducing the threats 

associated with allowing network traffic to flow freely between all computing components. 

Federal Information Security Management 

Act of 2002 (Title III, P.L. 107-347) 

The Federal Information Security Management Act of 

2002 (FISMA) requires agencies to secure systems 

through the use of cost-effective management, 

operational, and technical controls. The goal is to 

provide adequate security commensurate with the risk 

and extent of harm resulting from the loss, misuse, or 

unauthorized access to—or modification of—information 

collected or maintained by, or on behalf of, an agency. 

In addition, FISMA requires inspectors general to 

evaluate agencies’ information security programs 

and practices by assessing a representative subset 

of agency systems. The results are reported to the 

Office of Management and Budget, the Department of 

Homeland Security, and Congress annually. 
18 Office of Inspector General | Semiannual Report to Congress | September 2012

 

NATIONAL INSTITUTE OF STANDARDS 

AND TECHNOLOGY 

The National Institute of Standards and Technology promotes 

U.S. innovation and industrial competitiveness by advancing 

measurement science, standards, and technology in ways that enhance 

economic security and improve our quality of life. NIST carries out its 

mission via four cooperative programs: 

NIST Laboratories—Conduct research that advances the nation’s 

technology infrastructure and is needed by U.S. industry to continually 

improve products and services. 

Hollings Manufacturing Extension Partnership—Works with 

small- and mid-sized U.S. manufacturers through a nationwide network 

of 350 field offices to help them create and retain jobs, expand into new 

markets and new products, increase profits, and save time and money. 

Baldrige Performance Excellence Program—Promotes 

performance excellence among U.S. manufacturers, service companies, 

educational institutions, health care providers, and nonprofit 

organizations through outreach programs and the annual Malcolm 

Baldrige National Quality Award. 

Technology Innovation Program—Provides cost-shared awards 

to industry, universities, and consortia for research on potentially 

revolutionary technologies that address critical national and 

societal needs. 
 

National Institute of Standards and Technology 19 

NIST REVISES POLICIES AND PROCEDURES REGARDING 

RECYCLABLE MATERIALS 

OIG investigated allegations that NIST employees were taking recyclable materials from a NIST 

facility and converting those materials into cash for their personal benefit. The matter could not 

be criminally prosecuted due to lax internal controls that prevented positive identification of 

the recyclable materials. Based upon our investigative findings, NIST implemented numerous 

process improvement actions in the ordering, control, and recycling of job materials under the 

purview of the NIST Plant Division. 

CONTRACTOR ENTERS INTO CIVIL SETTLEMENT 

In August 2012, a contractor for both NIST and NOAA agreed to pay $7.75 million to settle civil 

claims brought against it by the government as the result of an investigation into its submission 

of false claims for payment during the period from March 12, 2008, to March 11, 2011. In March 

2008, the company pled guilty to knowingly submitting false or misleading export control filings 

to the Department. Despite that plea agreement, the company certified several times over the 

next 3 years that it had not been convicted of various criminal violations, including “making false 

statements,” within the preceding 3 years. The company used false On-Line Representations 

and Certifications Application (ORCA, a federal contracting database) certifications and similar 

certifications to successfully bid on numerous government contracts. Previously, in September 

2011, this same company had entered into a corporate compliance agreement for 3 years for 

this same conduct. The contractor falsely obtained 276 contracts from 16 different agencies 

during the period of the fraud. This settlement was the result of an investigation we conducted 

jointly with the Air Force Office of Special Investigations, FBI, and National Aeronautics and 

Space Administration (NASA) OIG. 
20 Office of Inspector General | Semiannual Report to Congress | September 2012

NATIONAL OCEANIC AND 

ATMOSPHERIC ADMINISTRATION 

The National Oceanic and Atmospheric Administration mission 

is to understand and predict changes in Earth’s environment, as well as 

conserve and manage coastal and marine resources to meet our nation’s 

economic, social, and environmental needs. NOAA does this through six 

line offices: 

National Environmental Satellite, Data, and Information Service— 

Observes the environment by operating a national satellite system. 

National Marine Fisheries Service—Conducts a program of 

management, research, and services related to the protection and 

rational use of living marine resources. 

National Ocean Service—Provides products, services, and information 

to promote safe navigation, support coastal communities, sustain marine 

ecosystems, and mitigate coastal hazards. 

National Weather Service—Reports the weather of the United States 

and provides weather forecasts and warnings to the general public. 

Office of Oceanic and Atmospheric Research—Conducts research 

related to the oceans and Great Lakes, the lower and upper atmosphere, 

space environment, and the Earth. 

Office of Program Planning and Integration—Develops and 

coordinates NOAA’s strategic plan, supports organization-wide planning 

activities, guides managers and employees on program and performance 

management, and integrates policy analysis with decision making. 
National Oceanic and Atmospheric Administration 21 

NOAA’S COST-PLUS-AWARD-FEE AND AWARD-TERM PROCESSES NEED TO 

SUPPORT FEES AND EXTENSIONS (OIG-12-027-A) 

In December 2007, the Office of Management and Budget’s Office of Federal Procurement Policy 

issued guidance to chief acquisition officers and senior procurement executives to review and 

update their acquisition policies on the appropriate use of incentive contracts. As of June 2011, 

NOAA had nine active cost-plus-award-fee (CPAF) and cost-plus-award-term (CPAT) contracts, 

which provide financial incentives based on contractor performance. These contracts had a 

potential maximum value of approximately $1.6 billion, including approximately $87 million in 

available award-fee pools and about $386 million in available award-term periods. While incentive 

contracts can encourage excellence in contractor performance, they can be burdensome to 

administer. These contracts also require effective monitoring to ensure that contract dollars are 

spent wisely and that award fees and terms are justified based on contractor performance. 

NOAA gave contractors high ratings, resulting in substantial award fees or extended contract 

periods of performance, for eight of nine contracts. However, the ratings associated with four of 

these contracts lacked sufficient support to demonstrate that the contractor met or exceeded 

the award-fee or award-term evaluation criteria. As a result, approximately $43.8 million was 

paid in award fees or was approved for contract extensions without proper justification. 

We recommended that the Director of the NOAA Acquisition and Grants Office 

• 	 require performance monitors to provide narrative comments that identify specific strengths, 

weaknesses, and deficiencies to support assigned ratings; 

• 	 develop award-fee and award-term incentive structures that encourage contractor 

excellence; 

• 	 update the performance evaluation plans for two of the contracts to add more measurable 

award-fee criteria; 

• 	 develop measurable and outcome-based criteria for assessing contractor performance for 

award fees and award-term extensions; 

• 	 require a cost-benefit analysis in decisions on CPAF and CPAT contracts; 

• 	 establish clear division of responsibility for the evaluation team and prohibit the same official 

from performing multiple roles; and 

• 	 develop controls over the maintenance of contract files and contract data to ensure more 

immediate availability and completeness of documentation for contract actions. 

AUDIT OF THE JOINT POLAR SATELLITE SYSTEM: CONTINUING PROGRESS IN 

ESTABLISHING CAPABILITIES, SCHEDULES, AND COSTS IS NEEDED TO MITIGATE 

DATA GAPS (OIG-12-038-A) 

NOAA, in partnership with the National Aeronautics and Space Administration (NASA), is 

acquiring and developing the next generation of polar-orbiting satellites for its Joint Polar 

Satellite System (JPSS). JPSS components currently envisioned for the system comprise the 

Suomi National Polar-orbiting Partnership (Suomi NPP), JPSS-1, JPSS-2, and two free flyer 

satellites. NASA launched Suomi NPP on October 28, 2011. 

In our September 2011 report Challenges Must Be Met to Minimize Gaps in Polar 

Environmental Satellite Data (OIG-11-034-A), we addressed the need for JPSS baseline 

capabilities, costs, and schedule to be finalized, because uncertain baselines translate to 

uncertain budget requirements. In this audit, we further examined the determination of program 

requirements and NOAA’s process for estimating the program’s life cycle cost. Our objectives 

were to (1) assess the adequacy of JPSS formulation activities and (2) monitor the program’s 

efforts to maintain continuity of polar satellite data. 
22 Office of Inspector General | Semiannual Report to Congress | September 2012 

We found that NOAA must clearly define JPSS capabilities, schedule, and cost. By defining 

the program and refining its cost-estimating process (see figure below for the agency’s JPSS 

cost estimation process), NOAA can ensure that the estimate for JPSS is reliable. Also, the 

program’s artificially flattened budget profile needs to be independently validated. Further , Suomi 

NPP data validation and ground system improvements are needed for operational use. Finally, a 

10–16-month gap between Suomi NPP and JPSS-1 operational data is expected. 

Evaluation of NOAA’S Cost Estimating Process for JPSS 

Define the 

estimate’s purpose 

Conduct sensitivity

analysis Define the program 

Develop the

estimating plan 

Determine the 

estimating structure 

Initiation 

and Research Assessment Analysis Presentation

Conduct risk and 

uncertainty analysis 

Present to management

for approval 

Update the estimate

to reflect actual 

costs/changes 

Document the estimate Identify ground rules

and assumptions 

Obtain the data 

Develop point estimate

and compare to an

independent cost estimate 

Key: Generally consistant

with best practice Requires attention Significant challenge 

Source: OIG analysis of NOAA cost-estimating activities against GAO-defined best practices 

We recommended that the Deputy Secretary for Operations ensure that 

• 	 sufficient resources and attention are given to finalizing JPSS high-level requirements and 

completing system definition; 

• 	 the program’s acquisition strategy for JPSS-3 and JPSS-4 is determined, documented, and 

shared with the Department, OMB, and Congress; 

• 	 the National Environmental Satellite, Data, and Information Service (NESDIS) and the JPSS 

program quantify cost savings while determining how to efficiently process environmental 

data records; 

• 	 NESDIS determines whether an enterprise approach to developing and maintaining data 

products from its environmental satellites could achieve economies of scale; 

• 	 sufficient resources and attention are given to permanently filling key management positions; 

• 	 a policy that requires major system acquisition programs to adhere to cost-estimating best 

practices is developed; 

• 	 cost-estimating best practices are more closely adhered to in the JPSS program and other 

major system acquisitions; 

• 	 an independent cost estimate adequately tests the viability of the program’s funding profile; 

and 

• 	 stakeholders are sufficiently informed of unplanned schedule and capability trade-offs, if 

needed, to meet surges in effort necessary for launches. 
National Oceanic and Atmospheric Administration 23 

CONGRESSIONAL TESTIMONY (OIG-12-036-T) 

On September 12, 2012, the Inspector General testified about the 

Department’s response to the National Weather Service’s (NWS’s) 

unauthorized reprogramming of budgetary resources. His testimony focused on three areas: whistleblower complaints, dating 

back to 2010, many of which have since been validated by multiple 

reviews of NWS financial mismanagement; separate Departmental 

and NOAA internal inquiries, resulting in both the Department and 

NOAA undertaking significant corrective action; and recent and 

current OIG follow-up reviews, to measure the sufficiency of the 

internal inquiries and the resulting corrective actions. 

“Our focus has shifted from reviewing 

the reprogramming request to 

evaluating the Department’s progress 

in taking corrective action.”

IG testimony before a House Science, Space, and 

Technology Subcommittee, September 12, 2012 

FORMER EXECUTIVE DIRECTORS PLEAD GUILTY TO THEFT OF 

NOAA GRANT FUNDS 

In May 2012, two former executive directors for the Alaska Eskimo Whaling Commission 

(AEWC) pled guilty to counts of fraud and money laundering. AEWC had received grant funds 

from NOAA to implement a whaling weapon improvement plan; undertake a census of whale 

species; and have employees and commissioners attend International Whaling Commission 

meetings and AEWC meetings. 

In June 2011, a former AEWC executive director was indicted on two counts of theft or bribery 

concerning programs receiving federal funds in the U.S. District Court for the District of Alaska. 

In September 2011, a second former executive director of AEWC was indicted on one count 

of wire fraud, two counts of theft or bribery concerning programs receiving federal funds, and 

one count of money laundering in the U.S. District Court for the District of Alaska. A joint 

investigation with the FBI and the Internal Revenue Service’s (IRS’) Criminal Investigation 

Department disclosed that the former executive directors fraudulently obtained and misapplied 

approximately $100,339 and $475,000, respectively, in AEWC funds. Both defendants are 

awaiting sentencing, which is scheduled for November and December, 2012. 

NOAA OLE REVISES FIREARMS POLICY AND DISCIPLINES AGENT 

OVER INCIDENT 

NOAA’s Office of Law Enforcement (OLE) accepted our recommendations to change its 

firearms training to emphasize existing policy prohibiting alcohol consumption while armed after 

our investigation substantiated allegations that an agent had consumed numerous alcoholic 

beverages at a Super Bowl party while armed with his government-issued handgun. NOAA OLE 

also agreed to increase the frequency of its firearms qualifications from semiannual to quarterly, 

the standard among federal law enforcement agencies. We also referred the matter to NOAA 

OLE for any administrative action against the agent that it deems appropriate. 
24 Office of Inspector General | Semiannual Report to Congress | September 2012

NATIONAL TELECOMMUNICATIONS 

AND INFORMATION ADMINISTRATION 

The National Telecommunications and Information 

Administration serves as the executive branch’s principal advisor 

to the President on domestic and international telecommunications 

and information policy issues. NTIA manages the federal use 

of the electromagnetic spectrum, provides grants for national 

information and public broadcasting infrastructure projects, and 

performs telecommunications research and engineering. It works to 

enhance citizens’ access to cable television, telephone, and other 

telecommunications services and educates state and local governments 

and other entities on ways to use information technology and 

telecommunications more effectively. 
 

National Telecommunications and Information Administration 25 

SIGNIFICANT IT SECURITY PROGRAM IMPROVEMENTS ARE NEEDED TO 

ADEQUATELY SECURE NTIA’S SYSTEMS (OIG-12-035-A) 

As a part of FISMA requirements, OIG evaluated seven NTIA systems and found that 

fundamental steps for securing its information and systems have not been taken. These 

deficiencies include (1) inadequate security categorizations that jeopardize critical bureau 

information, (2) significant weaknesses in IT software and hardware inventory practices, (3) 

major inadequacies in NTIA’s process to remediate security weaknesses, (4) weaknesses in 

managing its IT security workforce and developing effective IT security policies and procedures, 

and (5) significant deficiencies in key IT security controls. These issues have resulted in 

ineffective management of security controls needed to protect NTIA’s systems and information. 

We recommended that the Assistant Secretary for Communications and Information ensure 

the following: 

• 	 the authorization status of NTIA’s systems is revised to interim authorization to operate until 

(1) system owners and NTIA officials collaborate to identify and categorize all information 

types that are processed, stored, or transmitted by each system and categorize each system 

accordingly; (2) system owners develop and maintain an accurate hardware and software 

inventory for their systems; (3) NTIA implements and assesses appropriate IT security 

controls; and (4) NTIA follows the plan of action and milestones process required by the 

Department’s IT security policy. 

• 	 system owners, IT security officers, authorizing officials, and other staff with critical IT security 

roles are appropriately trained, earn certifications as required by Department policy, and have 

the required metrics incorporated into their performance plans. 

• 	 NTIA’s chief information officer and IT security officer develop and maintain NTIA security 

policies, procedures, standards, and guidance consistent with departmental and federal 

requirements. 
26 Office of Inspector General | Semiannual Report to Congress | September 2012

UNITED STATES PATENT 

AND TRADEMARK OFFICE 

The United States Patent and Trademark Offi ce administers the 

nation’s patent and trademark laws. Patents are granted and trademarks 

registered under a system intended to provide incentives to invent, invest 

in research, and commercialize new technology. USPTO also collects, 

assembles, publishes, and disseminates technological information 

disclosed in patents. 
 

 

 

 

United States Patent and Trademark Office 27 

USPTO’S OTHER BACKLOG: PAST PROBLEMS AND 

RISKS AHEAD FOR THE BOARD OF PATENT APPEALS 

(OIG-12-032-A) 

The Board of Patent Appeals and Interferences (BPAI) faces the 

challenge of a growing number and pendency of ex parte appeals 

(see figure below for appeals process). USPTO has accumulated 

a substantial backlog and pendency of patent appeals. Thus, 

applicants are waiting longer to receive a decision. The time 

spent by appellants awaiting a decision has almost doubled 

between FY 2010 and mid-FY 2012. An additional challenge, 

the America Invents Act of 2011 (AIA), gives BPAI operations 

additional responsibilities—including planning, implementing, and 

institutionalizing new proceedings for reviews and expanding the 

size of BPAI to meet these responsibilities. Because of these 

challenges, our review sought to determine (1) whether BPAI’s 

staffing and resources have changed in relation to changes in its 

caseload and (2) to what extent BPAI operations and resources 

will be affected by the implementation of AIA. 

Between FYs 2005 and 2011, as the number of appeals BPAI 

received for review rose substantially (as have the appeal backlog 

and pendency time), BPAI’s staffing levels have remained 

essentially flat. Furthermore, until 2008, inaccurate data delayed 

efforts to address the growing backlog and increase in appeal 

pendency. 

USPTO’s Board of Patent Appeals 

and Interferencesa 

USPTO’s responsibilities include reviewing 

and deciding on patent applications, as well as 

providing the means for parties to appeal patent 

examiners’ decisions. Although the backlog of patent 

applications remains at more than 600,000, USPTO 

has also accumulated another substantial backlog: 

patent appeals. 

Responsibility for patent appeals rests with BPAI, 

USPTO’s administrative law body. Most of BPAI’s cases 

are ex parte appeals, which do not include all parties’ 

presence or testimony. In addition, BPAI receives 

requests for inter partes and ex parte reexaminations 

from patent owners or third parties to evaluate the 

patentability of a claim or claims of an existing patent. 

BPAI also has jurisdiction for interferences, which are 

appeals from applicants who claim the same proposed 

invention as one already claimed by another applicant 

or patent owner. Patent applicants may submit an 

ex parte appeal to BPAI after any of their claims have 

been rejected twice by patent examiners. 

a

 As of September 16, 2012, BPAI was officially 

changed to the Patent Trial and Appeal Board. 

Overview of BPAI Patent Appeals Process 

Claims for 

patent 

rejected 

twice 

Notice of 

appeal; 

appeal 

brief filed 

Appeal 

brief 

answered 

by 

examiner 

Appeal 

docketed 

to BPAI; 

decision 

made 

Appeal 

made to the 

Court of 

Appeals for 

the Federal 

Circuit 

Source: OIG, based on USPTO documentation 

We recommended that the Under Secretary of Commerce for Intellectual Property and Director 

of USPTO 

• 	 align BPAI’s resource planning with the hiring actions and expected production levels of 

patent examiners; 

• 	 require BPAI to annotate current information on public websites to indicate that backlog data 

prior to FY 2010 are underreported and therefore should be used with caution; 
28 Office of Inspector General | Semiannual Report to Congress | September 2012 

• 	 direct BPAI to develop and publish performance measures and targets for ex parte appeals 

and other proceedings; 

• 	 develop comprehensive management plans (including how to measure progress, gauge 

performance, and identify risk) to address the implementation and operational oversight of the 

new BPAI proceedings under the AIA; 

• 	 ensure that data processing systems meet the needs of all four AIA proceedings; and 

• 	 explore the feasibility of BPAI’s current management and administrative structure and staffing, 

given the increase in the number of proceedings and staff at BPAI. 

30 Office of Inspector General | Semiannual Report to Congress | September 2012

AMERICAN RECOVERY 

AND REINVESTMENT ACT 

The Recovery Act—signed into law by President Barack Obama on 

February 17, 2009—has three immediate goals: (1) create new jobs 

and save existing ones, (2) spur economic activity and invest in longterm growth, and (3) foster unprecedented levels of transparency and 

accountability. 

Five Department of Commerce bureaus—the Census Bureau, EDA, 

NIST, NOAA, and NTIA—and OIG received $7.9 billion under the Act, 

with $1.2 billion ultimately rescinded or transferred to other agencies. As 

of September 30, 2012, the Department had obligated almost all of the 

approximately $6.7 billion remaining and had disbursed approximately 

$4.8 billion. (The disbursal amount includes funding for the nowcompleted NTIA Digital Television Converter Box Coupon Program.) 
 

Dollars (in Millions)

$4,500 

$4,000 

$3,500 

$3,000 

$2,500 

$2,000 

$1,500 

$1,000 

$500 

$0 

$4,130 

59% 

82% 

87% 

85% 

92% 

100% 

Total Obligations 

Total Disbursements 

Percent Disbursed 

$2,421

$360 $250 

$213 $248 $215 $146 $134 

$230 $213 

$997 $995 

$294 

92% 

100% 

90% 

80% 

70% 

60% 

50% 

40% 

30% 

20% 

10% 

0% 

Percent Disbursed 

NTIA NIST NIST Research NOAA Procurment, NOAA Operations, EDA Census 

Construction and Services Acquisition, and Research, and 

Construction Facilities 

American Recovery and Reinvestment Act 31 

OIG RECOVERY ACT OVERSIGHT, FEBRUARY 2009–MARCH 2012 

Funded by $16 million for proactive oversight of the Department’s Recovery Act programs and 

activities, OIG has been evaluating whether agencies are using Recovery Act funds efficiently 

and effectively and following up on complaints, including whistleblower reprisal allegations. 

Key Activities Cumulative Results 

Published audit and evaluation reports 20 

Unpublished work products 5 

Audits/evaluations in progress 2 

OIG recommendations for action, correction, or improvement 78 

Recommendations implemented to take corrective action by making 

improvements, reducing risk, or preventing waste 57 

Investigations completed 23 

Investigations in progress 4 

Whistleblower reprisal allegations received 9 

Whistleblower reprisal allegations accepted 1 

Debarments and corporate compliance agreements implemented 0 

Proactive training and outreach sessions held 129 

Individuals trained 6,624 

Hours of training provided 8,259 

COMMERCE BUREAUS’ RECOVERY ACT OBLIGATIONS AND DISBURSEMENTS 

AS OF SEPTEMBER 30, 2012 
32 Office of Inspector General | Semiannual Report to Congress | September 2012 

OVERSIGHT ACTIVITIES OF NIST’S RECOVERY ACT CONSTRUCTION CONTRACTS 

NEED IMPROVEMENT (OIG-12-028-A) 

The Recovery Act appropriated $360 million to NIST to construct research facilities, including 

$180 million in contracts for the construction and renovation of research facilities on NIST’s 

headquarters in Gaithersburg, Maryland, and NIST’s campus in Boulder, Colorado. The 

construction projects, as initially proposed, included a precision measurement laboratory; 

maintenance and repair projects to enhance NIST’s aging facilities; Center for Neutron Research 

expansion for a high-efficiency cooling system and supporting infrastructure; and a National 

Structural Fire Resistance Laboratory, to study how fires start. 

We found deficiencies in NIST’s operating procedures and oversight practices. With tens of 

millions of dollars of Recovery Act funds remaining, NIST needs to strengthen its oversight of 

these construction projects. Specifically, we found 

• 	 inadequate controls over contract extensions jeopardized timely completion of projects, 

• 	 lack of adequate oversight allowed noncompliance with the Buy American provision of the 

Recovery Act, 

• 	 lack of adequate oversight resulted in inaccurate/incomplete data posted on government 

websites, and 

• 	 inadequate controls led to deficiencies in award administration. 

Consequently, we recommended that the Under Secretary of Commerce for Standards and 

Technology direct NIST to 

• 	 establish standard operating procedures (SOPs) for reviewing, monitoring, and approving 

contracts for extensions; extend the performance period for six contracts that missed or are at 

risk of missing their performance end dates; and create a management tool for monitoring the 

progress of construction contracts; 

• 	 update the SOPs for Buy American exception determinations and waiver approvals and 

conduct Buy American procedures training for staff; 

• 	 provide training to staff and contractors on Recovery jobs calculation formula and ensure that 

data are correctly posted on government websites; and 

• 	 review the contract award process to correct inconsistencies in obtaining legal reviews, 

issuing contracting officer’s technical representative (COTR) letters, and conducting fraud 

prevention training. 

NTIA NEEDS STRONGER MONITORING OF BTOP GRANT RECIPIENTS’ MATCH 

(OIG-12-029-A) 

By September 27, 2010, NTIA had awarded 233 Broadband Technology Opportunities Program 

(BTOP) grants, including Comprehensive Community Infrastructure (CCI), Public Computing 

Centers (PCC), and Sustainable Broadband Adoption (SBA) grants. By March 31, 2012, the 

number of BTOP grants had decreased to 228 due to grant cancelations and terminations. 

To oversee grant recipients’ match throughout the award, including postaward, NTIA monitors 

cash drawdowns, reviews grantees’ quarterly financial reports for matching share, and 

documents proportionality waivers. In December 2010, NTIA developed a match matrix to 

review grant match. NTIA’s reviews of CCI grants included an in-depth review of all proposed 

budgeted match line items. However, for the SBA and PCC grants, NTIA’s match matrix did 
American Recovery and Reinvestment Act 33 

not provide sufficient information to determine if NTIA’s review 

was thorough and effective. We also found two internal control 

vulnerabilities with respect to access to the Treasury Automated 

Standard Application for Payment (ASAP) system to make cash 

drawdowns. In addition, 32 percent of our sample of grantees did 

not record all of their match amounts in their financial records. 

Finally, a significant number of grant recipients were not in 

compliance with the proportionality clauses of their grants. 

We recommended that the Assistant Secretary for 

Communications and Information 

• 	 develop and implement improved processes for reviewing PCC 

and SBA grant match amounts; 

• 	 formally communicate the risk associated with third-party cash 

drawdowns to all grant recipients and stress the importance of 

increased monitoring on their behalf when allowing third parties 

to draw down grant funds from the Treasury ASAP system; 

• 	 implement program office controls to closely monitor ASAP drawdowns on a timely basis, 

especially those grant recipients that have delegated ASAP system access to third parties; 

• 	 communicate to recipients that match expenditures must be supported and correctly 

reflected in their financial records; and 

• 	 work with NIST and NOAA grants officers to provide NTIA with the BTOP grantees’ quarterly 

financial status reports and monitor the contribution trends and proportionality waiver activity 

to ensure grantees are providing their required match. 

REVIEW OF NTIA’S OVERSIGHT OF THE BOOZ ALLEN HAMILTON CONTRACT 

SUPPORTING THE BROADBAND TECHNOLOGY OPPORTUNITIES PROGRAM 

(OIG-12-031-M) 

In August 2009, the Department of Interior, on behalf of NTIA, entered into a contract with Booz 

Allen for technical expertise during the BTOP grant-making process and a system to manage 

and monitor grant performance and oversight. In the course of this contract, NTIA identified the 

need for further support; it competitively awarded a second contract to Booz Allen for BTOP 

program management and support services. The subsequent contract for $31 million began 

in April 2012 and extends through the estimated completion of the BTOP program, which is in 

February 2015. The two Booz Allen contracts total approximately $106 million. 

The Booz Allen contracts are predominantly time and materials (T&M) contracts, under which 

a contractor’s base payments on the number of labor hours are billed at a fixed hourly rate and 

the cost of materials. The federal government considers these contracts high-risk because the 

contractor’s profit is tied to the number of hours worked, although T&M contracts also must 

incorporate a ceiling price that the contractor exceeds at its own risk. 

NTIA has generally met the requirements spelled out in the Federal Acquisition Regulation (FAR) 

for T&M contracts. In addition, NTIA’s risk management for the Booz Allen contract includes 

regular invoice reconciliation, tracking of contractor performance, management of contract 

modifications to facilitate appropriate alignment of personnel overtime, and approvals for other 

direct costs and travel. Nonetheless, NTIA should consider improving contract oversight controls 

in (1) invoice and payroll reconciliation and (2) independent review. 

The Recovery Act and Broadband 

The Recovery Act gave $4.7 billion to NTIA to establish 

BTOP, a competitive grant program intended to provide 

funds for deploying broadband infrastructure in the 

United States in order to enhance broadband capacity at 

public computing centers, improve access to broadband 

services for public safety agencies, promote sustainable 

broadband adoption projects, and develop an interactive 

map showing broadband capabilities and availability. 

Since enactment of the law, OIG has provided oversight 

of NTIA’s administration of the $4.4 billion program. The 

Recovery Act requires BTOP grantees to provide at 

least a 20 percent nonfederal matching share. 
34 Office of Inspector General | Semiannual Report to Congress | September 2012 

CONGRESSIONAL TESTIMONY (OIG-12-026-T) 

On May 16, 2012, the Inspector General testified about the 

approximately $4.7 billion in funds the Recovery Act initially 

provided to NTIA to establish BTOP. His testimony addressed five 

challenges confronting BTOP at that time: 

1. Slow awardee spending could result in unfinished grant 

projects. OMB directed federal agencies to complete Recovery 

Act projects by September 30, 2013. OIG is primarily concerned 

with infrastructure projects which represent about $3.2 billion 

in awards.

2. NTIA is addressing program office monitoring issues but 

additional monitoring of equipment procurement may be needed. 

OIG provided NTIA recommendations for improving internal 

controls over monitoring activities. The agency is addressing those recommendations; 

however, grantee equipment procurement and installation have become areas for NTIA to 

focus monitoring efforts. 

3. Issues with awardee grant match documentation require closer NTIA oversight. NTIA should 

strengthen its oversight of recipients meeting their match requirements. Match funds should 

be contributed in proportion to drawdowns, to ensure that projects are appropriately funded 

throughout their development and remain on schedule. 

4. NTIA needs to assess the impact that the recently established First Responder Network 

Authority (FirstNet) program may have on existing BTOP public safety projects. Seven BTOP 

projects involve public safety communication networks that will be impacted by FirstNet’s 

public safety broadband network. Past BTOP oversight helps OIG anticipate issues and 

concerns that could potentially arise with FirstNet. 

5. Funding questions about 2013 and beyond raise concerns over continued BTOP oversight. It 

is anticipated that OIG and NTIA will require BTOP funding beyond 2013 to oversee grantfunded projects, due largely to the need to close out projects and, in some cases, slower 

project spending that will likely result in the issuance of extension waivers. 

LESSONS LEARNED REVIEW FOR THE AMERICAN RECOVERY AND 

REINVESTMENT ACT 

The Department of Commerce participated in a joint review initiated by the Recovery 

Accountability and Transparency Board (the Board) to document the lessons learned from 

implementing the Recovery Act. Using a set of standard questionnaires provided by the Board, 

OIG collected valuable input from Departmental management and the five bureaus that received 

Recovery Act funds—the Census Bureau, EDA, NIST, NOAA, and NTIA. Respondents reported 

on the following: 

1. Pre-award/award processes for awarding and dispersing Recovery Act funds. The 

Department reported using various mechanisms to communicate with potential Recovery 

Act fund recipients, and communications were generally effective. The Department generally 

required and reviewed applications and plans before awarding Recovery Act funds. 

“For the Department to ensure 

effective implementation of BTOP, 

especially in light of fulfilling OMB 

and legislative requirements, OIG 

and NTIA will require Congress to 

continue your oversight efforts.” 

IG testimony before a House Energy and Commerce 

Subcommittee, May 16, 2012 
American Recovery and Reinvestment Act 35 

2. Outreach, education, and technical assistance to engage Recovery Act fund recipients. The 

Department reported using all mechanisms identified by the Board (except podcasts) to reach 

out to Recovery Act fund recipients. In addition, more than 1,000 recipients had attended 

NTIA’s BTOP workshops, and hundreds of recipients attended workshops for other Recovery 

Act programs. 

3. Performance measures of the success of program implementation. The Department reported 

using both outcome- and output-oriented measures to measure achievement of four of the 

five primary goals identified by the Board: to preserve/create jobs and promote economic 

recovery; assist those most impacted by the recession; increase economic efficiency 

by spurring technological advances in science and health; and invest in transportation, 

environmental protection, and other infrastructure for long-term economic benefits. However, 

the Department programs were not applicable to achieving the goal of stabilizing state 

and local government budgets to minimize or avoid reductions in essential services and 

counterproductive state and local tax increases. 

4. Monitoring and oversight of Recovery Act requirements. The Department reported plans 

to continue some of the oversight mechanisms post-Recovery Act funding. Additionally, it 

reported various challenges experienced, such as difficulties in meeting quarterly Recovery 

Act reporting requirements and a negative impact on non-Recovery Act operations from 

competing priorities. While the Department has terminated some Recovery Act projects, it has 

not yet initiated any Recovery Act–related suspension or debarment actions directly. However, 

OIG assisted the Air Force in one matter that involved four suspension actions of parties 

associated with a recipient of Recovery Act funds from the Department. 

Overall, the Department reported that guidance and oversight received from the Board and OIG 

were helpful. 
Recovery Act a 

ESA b 

NOAA 

Department-wide 

EDA

ITA

NIST 

NTIA 

USPTO 

6 

3 

2 2 2 

1 1 1 1 

36 Office of Inspector General | Semiannual Report to Congress | September 2012 

WORK IN 

PROGRESS 

WORK IN PROGRESS (BY OVERSIGHT AREA) 

During this reporting period, 19 OIG audits and evaluation projects were initiated or under way. 

a Both Recovery Act–related works in progress concern NTIA. 

b The ESA works in progress concern the Census Bureau. 

DEPARTMENT-WIDE 

IT Security 

Assess the effectiveness of the Department’s IT security program by determining whether key 

security measures adequately project the Department’s systems and its information, as required by 

the Federal Information Security Management Act of 2002 (FISMA). 

Purchase Card Controls 

Determine whether the Department has adequate transaction-level internal controls over purchase 

card transactions by reviewing a sample from all bureaus during FY 2011. During FY 2011, the 

Department had more than 4,500 purchase cards, which processed approximately $118.6 million in 

purchase card transactions. 
 

Work In Progress 37 

Time-and-Materials and Labor-Hours (T&M/LH) Contracts 

Assess whether the Department properly awards and administers these contracts. For FY 2011, 

Commerce awarded 2,893 high-risk T&M/LH contract actions for $586 million. Both contract types 

provide for payment to contractors on the basis of fixed hourly billing rates, designed to recover the 

contractors’ direct salaries, overhead, general and administrative expenses, and profit. T&M contracts 

also provide for reimbursement of the contractors’ actual costs of supplies and materials. 

Unliquidated Obligations 

Evaluate controls over the management and closeout of unused or unneeded (unliquidated) 

obligations. It is essential that the Department perform timely reviews of contract, grant, and other 

unliquidated obligations and deobligate funds no longer needed. This could result in funding available 

for other purposes. 

Controls over Quarterly Conference Reporting 

Determine whether the Department has established controls and provided guidance to bureaus for 

reporting quarterly conference data. 

FY 2012 Audit of the Department’s Financial Statements 

Determine whether the financial statements are presented fairly, in all material respects, in 

accordance with generally accepted accounting principles. (The audit will also consider the 

Department’s internal controls over financial reporting and test compliance with certain provisions 

of laws, regulations, and contracts that could have a direct and material effect on the financial 

statements.) 

ECONOMIC DEVELOPMENT ADMINISTRATION 

Audit of EDA’s IT Security Program 

As part of our FY 2012 FISMA audit, (1) assess the effectiveness of EDA’s IT security program, 

(2) determine the significant factors that contributed to the cyber compromise of EDA’s information 

systems, and (3) evaluate activities either completed or planned to reconstitute its information 

systems to support critical operational requirements. 

ECONOMICS AND STATISTICS ADMINISTRATION 

Census 2020 Redesign 

Review the status of the Bureau’s Census 2020 redesign. Determine if Census governance and 

internal controls are adequate; assess implementation of each research project, including time frames 

for completion and deliverables; and assess the Bureau’s approach to evaluating each project, 

including whether accurate and reliable data will be available. Without changes, Census 2020 could 

cost up to $30 billion (according to GAO’s estimate). 

Letter to Senator Coburn re: Census Bureau Administrative Records Use and 

Address Sharing 

Respond to the Senator’s request during the July 18, 2012, hearing Census: Planning Ahead for 

2020 that OIG answer (1) what Congress can do to help the Census Bureau make greater use of 

administrative records and (2) how Congress can ease the Census Bureau’s restrictions on sharing 

address information with state and local governments. 
 

 

 

 

38 Office of Inspector General | Semiannual Report to Congress | September 2012 

INTERNATIONAL TRADE ADMINISTRATION 

Review of U.S. Export Assistance Centers (USEACs) 

(1) Evaluate whether the U.S. & Foreign Commercial Service’s (CS’) allocation of domestic resources 

meets its mission and goals; (2) assess CS’ level of cost recovery; and (3) determine the extent 

to which the level of coordination between the USEACs and their federal government agencies is 

sufficient to meet the President’s priorities with respect to the National Export Initiative. 

NATIONAL INSTITUTE OF STANDARDS AND TECHNOLOGY 

Review of FYs 2011 and 2012 Manufacturing Extension Partnership (MEP) 

Conference Spending 

Review federal spending at MEP conferences in FYs 2011 and 2012, including the May 2012 

conference, to determine the legitimacy and reasonableness of related charges. 

NATIONAL OCEANIC AND ATMOSPHERIC ADMINISTRATION 

Fishery Management Councils (FMCs) and Rulemaking 

Review controls, processes, and operational best practices used by NOAA FMCs to develop 

rules for the industry. Evaluate the role of NOAA and the FMCs in the fishery rulemaking process 

and the transparency of the rulemaking process prescribed under the Magnuson-Stevens Fishery 

Conservation and Management Act. 

Geostationary Operational Environmental Satellite-R Series (GOES-R) Acquisition 

and Development 

Assess the adequacy of contract management and administration and the effectiveness of 

management’s direction, monitoring, and collaboration for development of select components in the 

GOES-R program. 

Actions Taken to Correct Deficiencies Leading to Budget Reprogramming Requests 

In response to a June 2012 request from the U.S. Senate to review materials and findings from a May 

2012 internal inquiry report prepared by the Department, determine the adequacy of actions taken by 

NOAA in addressing issues arising from FY 2012 reprogramming requests. 

NATIONAL TELECOMMUNICATIONS AND INFORMATION ADMINISTRATION 

Public Safety Interoperable Communications (PSIC) Grant Program Costs 

and Equipment 

Determine whether (1) costs incurred by grantees receiving PSIC funds from the Department 

are allowable and in accordance with grant requirements; (2) grantees are meeting matching 

share requirements; (3) equipment acquired by the grantees has been tested and certified before 

deployment, operates effectively, and improves interoperability in the state; and (4) grantees are on 

schedule to complete interoperable communications investments by September 30, 2011, or—with 

an approved extension—by September 30, 2012. (The Implementing Recommendations of the 

9/11 Commission Act of 2007 require Commerce OIG to annually assess NTIA’s management of 

PSIC and to transmit findings to the House Committee on Energy and Commerce and the Senate 

Committee on Commerce, Science, and Transportation. In addition, Congress specified that 25 

financial audits be conducted on the PSIC program. This report will contain the remaining 16 

fi nancial audits.) 
Work In Progress 39 

UNITED STATES PATENT AND TRADEMARK OFFICE 

USPTO’s Deployment of Public and Enterprise Wireless Capability 

As part of our FY 2012 FISMA audit, determine whether security requirements were adequately 

addressed during system development. 

FY 2012 Financial Statement Audit 

Determine whether USPTO’s financial statements are presented fairly, in all material respects, in 

accordance with generally accepted accounting principles. (The audit will also consider USPTO’s 

internal controls over financial reporting and test compliance with certain provisions of laws, 

regulations, and contracts that could have a direct and material effect on the financial statements.) 

AMERICAN RECOVERY AND REINVESTMENT ACT 

Broadband Technology Opportunities Program (BTOP) Subrecipient Monitoring 

Assess whether all subrecipients have been identified and properly classified and determine whether 

adequate controls are in place to ensure effective subrecipient monitoring and compliance with 

award terms and conditions. 

Review of Broadband Technology Opportunities Program Award to the Executive 

Office of the State of West Virginia 

In response to a June 2012 request from the U.S. House of Representatives, (1) determine whether 

BTOP funds associated with the award are being properly and efficiently spent; (2) assess the 

process West Virginia used to apply for a BTOP grant and whether the application contained any 

material misrepresentations; and (3) review the process used to evaluate West Virginia’s application, 

including any steps NTIA took to verify claims in the application. 
40 Office of Inspector General | Semiannual Report to Congress | September 2012 

STATISTICAL DATA 

The Inspector General Act Amendments of 1988 require us to present the statistical data 

contained in Tables 1–8. 

TABLES	 Page 

1. Office of Investigations Statistical Highlights for This Period	 40
 

2. Audit Resolution and Follow-up	 41
 

3. Audit and Evaluation Statistical Highlights for This Period	 42
 

4. Audits with Questioned Costs	 43
 

5. Audits with Recommendations That Funds Be Put to Better Use	 44
 

6. Report Types for This Period	 44
 

6-a. Performance Audits 45
 

6-b. Evaluations and Inspections 46
 

7. Single Audit and Program-Specific Audits	 47
 

7-a. Processed Reports with Audit Findings 48
 

8. Audits Unresolved for More Than 6 Months	 49
 

TABLE 1. OFFICE OF INVESTIGATIONS STATISTICAL HIGHLIGHTS FOR THIS PERIOD 

Investigative activities cover investigations opened and closed by OIG; arrests by OIG 

agents; indictments and other criminal charges filed against individuals or entities as a result of 

OIG investigations; convictions secured at trial or by guilty plea as a result of OIG investigations; 

and fines, restitution, and all other forms of financial recoveries achieved by OIG as a result of 

investigative action. 

Allegations processed presents the number of complaints from employees, stakeholders, 

and the general public that were handled by our Complaint Intake Unit. Of these, some resulted 

in the opening of investigations; others were referred to Commerce bureaus for internal 

administrative follow-up. Others were unrelated to Commerce activities or did not provide 

sufficient information for any investigative follow-up and so were not accepted for investigation 

or referral. Fines and other financial recoveries refer only to agreements that a judge accepted. 
 

 

Statistical Data 41 

Investigative Activities 

Investigations opened 44 

Investigations closed 42 

Arrests 0 

Indictments/Informations 0 

Convictions 3 

Fines and other financial recoveries $11,414,884a 

Allegations Processed 

Hotline complaints 661 

Total complaints, all sources 661 

Referrals to bureaus or non-Commerce agencies 322 

Referrals with response required 126 

Responses received 127 

From referrals made this reporting period 34 

From referrals made prior 93 

Referrals closed 111 

Referrals with no response required 196 

Evaluated but not accepted for investigation or referral 295 

a This total is derived from our participation in two federal multi-agency investigations. It does not reflect actual 


monetary recoveries for the Department of Commerce.
 

TABLE 2. AUDIT RESOLUTION AND FOLLOW-UP 

The Inspector General Act Amendments of 1988 require us to present (in this report) audits 

issued before the beginning of the reporting period (April 1, 2012) for which no management 

decision had been made by the end of the period (September 30, 2012). Six audit reports 

remain unresolved for this reporting period (see page 49). 

Audit resolution is the process by which the Department of Commerce reaches an effective 

management decision in response to audit reports. Management decision refers to 

management’s evaluation of the findings and recommendations included in the audit report and 

the issuance of a final decision by management concerning its response. 

Department Administrative Order 213-5, Audit Resolution and Follow-up, provides procedures 

for management to request a modification to an approved audit action plan or for a financial 

assistance recipient to appeal an audit resolution determination. The following table summarizes 

modification and appeal activity during the reporting period. 

Report Category Modifi cations Appeals 

Actions pending (April 1, 2012) 0 1 

Submissions 0 2 

Decisions 0 1 

Actions pending (September 30, 2012) 0 2 
 

 

 

 

 

42 Office of Inspector General | Semiannual Report to Congress | September 2012 

TABLE 3. AUDIT AND EVALUATION STATISTICAL HIGHLIGHTS FOR THIS PERIOD 

Audits comply with standards established by the Comptroller General of the United States for 

audits of federal establishments, organizations, programs, activities, and functions. 

Inspections include evaluations, inquiries, and similar types of reviews that do not constitute an 

audit or a criminal investigation. 

Questioned costsa $ 46,093,633 

Value of audit recommendations that funds be put to better useb 61,141,213 

Value of audit recommendations agreed to by managementc 17,282,491 

These amounts include costs questioned by state and local government auditors or independent 

public accountants. 

a Questioned cost: This is a cost questioned by OIG because of (1) an alleged violation of a 

provision of a law, regulation, contract, grant, cooperative agreement, or other agreement or 

document governing the expenditure of funds; (2) a finding that, at the time of the audit, such 

cost is not supported by adequate documentation; or (3) a finding that an expenditure of funds 

for the intended purpose is unnecessary or unreasonable. 

b Value of audit recommendations that funds be put to better use: This results from an 

OIG recommendation that funds could be used more efficiently if Commerce management 

took action to implement and complete the recommendation. Such actions may include (1) 

reductions in outlays; (2) deobligation of funds from programs or operations; (3) withdrawal of 

interest subsidy costs on loans or loan guarantees, insurance, or bonds; (4) costs not incurred 

by implementing recommended improvements related to Commerce, a contractor, or a grantee; 

(5) avoidance of unnecessary expenditures identified in preaward reviews of contracts or grant 

agreements; or (6) any other savings specifically identified. 

c Value of audit recommendations agreed to by management: This is the sum of (1) 

disallowed costs and (2) funds put to better use that are agreed to by management during 

resolution. Disallowed costs are the amount of costs that were questioned by the auditors 

or the agency action official and subsequently determined—during audit resolution, or during 

negotiations by a contracting officer—not to be charged to the government. 
 

 

Statistical Data 43 

TABLE 4. AUDITS WITH QUESTIONED COSTS 

See table 3 for a definition of “questioned cost.” An unsupported cost is a cost that is not 

supported by adequate documentation at the time of the audit. Questioned costs include 

unsupported costs. 

Questioned Unsupported Report Category	 Number Costs Costs 

A.	 Reports for which no management 

decision had been made by the 12 $24,701,929 $4,819,060 

beginning of the reporting period 

B.	 Reports issued during the reporting 19 46,093,633 44,396,905 period 

Total reports (A+B) requiring a management 31 70,795,562 49,215,965 decision during the perioda 

C.	 Reports for which a management 

decision was made during the reporting 12 10,465,386 4,341,321 

periodb 

i. Value of disallowed costs	 14,846,282 10,296,829 

ii. Value of costs not disallowed 	 10,036,316 2,610,151 

D.	 Reports for which no management 

decision had been made by the end of 19 60,330,176 44,874,644 

the reporting period 

a Three audit reports included in this table are also included among reports with recommendations that funds be 

put to better use (see table 5). However, the dollar amounts do not overlap. 

b In Category C, lines i and ii do not always equal the total line in C because resolution may result in values greater 

than the original recommendations. 
 

 

 

44 Office of Inspector General | Semiannual Report to Congress | September 2012 

TABLE 5. AUDITS WITH RECOMMENDATIONS THAT FUNDS BE PUT TO BETTER USE 

See table 3 for a definition of “recommendation that funds be put to better use.” 

Report Category Number Value 

A. Reports for which no management decision had been 3 $1,979,832 made by the beginning of the reporting period 

B. Reports issued during the reporting period 3 61,141,213 

Total reports (A+B) requiring a management decision during 6 63,121,045 the perioda 

C. Reports for which a management decision was made 6 2,193,590 during the reporting periodb, c 

i. Value of recommendations agreed to by management 2,436,209 

ii. Value of recommendations not agreed to by 6,573 management 

D. Reports for which no management decision had been 1 60,927,455 made by the end of the reporting period 

a Three audit reports included in this table are also included among reports with questioned costs (see Table 4). 

However, the dollar amounts do not overlap. 

b In Category C, lines i and ii do not always equal the total line in C because resolution may result in values greater 

than the original recommendations. 

c The reviewing grant office identified Funds to Be Put to Better Use during its audit resolution review, which 


resulted in an additional report for C.
 

TABLE 6. REPORT TYPES FOR THIS PERIOD 

Performance audits are engagements that provide assurance or conclusions based on 

an evaluation of sufficient, appropriate evidence against stated criteria, such as specific 

requirements, measures, or defined business practices. Performance audits provide objective 

analysis so that management, and those charged with governance and oversight can use the 

information to improve program performance and operations, reduce costs, facilitate decision 

making by parties with responsibility to oversee or initiate corrective action, and contribute to 

public accountability. 

Evaluations and inspections include evaluations, inquiries, and similar types of reviews that 

do not constitute an audit or a criminal investigation. An inspection is defined as a process that 

evaluates, reviews, studies, or analyzes the programs and activities of a department or agency to 

provide information to managers for decision making; make recommendations for improvements 

to programs, policies, or procedures; and identify where administrative action may be necessary. 

Type Number of Reports Table Number 

Performance audits 7 Table 6-a 

Evaluations and inspections 4 Table 6-b 

Total 11 
Statistical Data 45 

TABLE 6-A. PERFORMANCE AUDITS 

Funds to Report Date Amount Amount Report Title Be Put to Number Issued Questioned Unsupported Better Use 

International Trade Administration 

Improvements Are Needed to 

Strengthen ITA’s Information OIG-12-037-A 09.27.2012 0 0 0 

Technology Security Program 

National Institute of Standards and Technology 

Oversight Activities of NIST’s 

Recovery Act Construction OIG-12-028-A 06.01.2012 0 0 0 

Contracts Need Improvement 

National Oceanic and Atmospheric Administration 

NOAA’s Cost-Plus-Award-Fee and 

Award-Term Processes Need to 

Support Fees and Extensions 

OIG-12-027-A 05.18.2012 $60,927,455 $43,802,965 0 

Audit of the Joint Polar Satellite 

System: Continuing Progress 

in Establishing Capabilities, 

Schedules, and Costs Is Needed to 

Mitigate Data Gaps 

OIG-12-038-A 09.27.2012 0 0 0 

National Telecommunications and Information Administration 

NTIA Needs Stronger Monitoring of 

BTOP Grant Recipients’ Match OIG-12-029-A 06.18.2012 0 0 0 

Significant IT Security Program 

Improvements Are Needed to 

Adequately Secure NTIA’s Systems 

OIG-12-035-A 09.07.2012 0 0 0 

U.S. Patent and Trademark Offi ce 

USPTO’s Other Backlog: Past 

Problems and Risks Ahead for OIG-12-032-A 08.10.2012 0 0 0 the Board of Patent Appeals and 

Interferences 
46 Office of Inspector General | Semiannual Report to Congress | September 2012 

TABLE 6-B. EVALUATIONS AND INSPECTIONS 

Funds to Report Date Amount Amount Report Title Be Put to Number Issued Questioned Unsupported Better Use 

Office of the Secretary 

Nonfederal Audit Results for 

the 6-Month Period Ending OIG-12-034-M 08.23.2012 $229,095 $1,209,815 $286,783 

June 30, 2012 

Economics and Statistics Administration 

2020 Census Planning: Delays with 

2010 Census Research Studies May 

Adversely Impact the 2020 Decennial 

Census 

OIG-12-023-I 04.05.2012 0 0 0 

High-Quality Maps and Accurate 

Addresses Are Needed to Achieve 

Census 2020 Cost-Saving Goals 

OIG-12-024-I 05.10.2012 0 0 0 

National Telecommunications and Information Administration 

Review of NTIA’s Oversight of the 

Booz Allen Hamilton Contract OIG-12-031-M 08.09.12 0 0 0 Supporting the Broadband 

Technology Opportunities Program 
Statistical Data 47 

TABLE 7. SINGLE AUDIT AND PROGRAM-SPECIFIC AUDITS 

OIG reviewed and accepted 188 audit reports prepared by independent public accountants 

and local, state, and other federal auditors. The reports processed with questioned costs, 

recommendations that funds be put to better use, and/or nonfinancial recommendations are 

listed in table 7-a. 

Agency Audits 

Economic Development Administration 34 

Minority Business Development Agency 1 

National Institute of Standards and Technologya 56 

National Oceanic and Atmospheric Administration 19 

National Telecommunications and Information Administrationb

 26 

Multi-bureau 49 

No Commerce expenditures 3 

Total 188 

a Includes 47 program-specific audits. 

b

 Includes 16 program-specific audits. 
48 Office of Inspector General | Semiannual Report to Congress | September 2012 

TABLE 7-A. PROCESSED REPORTS WITH MATERIAL AUDIT FINDINGS 

Report Title Report 

Number 

Date 

Issued 

Funds to Be Put 

to Better Use 

Amount 

Questioned 

Amount 

Unsupported 

Economic Development Administration 

Acadiana Regional Development 

District ATL-09999-12-4446 04.25.12 0 $150,000 0 

Iosco County ATL-09999-12-4551 08.30.12 0 168,500 0 

North Central Planning and 

Development District, Inc. ATL-09999-12-4417 04.25.12 75,048 0 0 

Northern Enterprises, Inc. ATL-09999-12-4369 04.25.12 0 0 0 

Southeastern Arizona 

Governments Organization ATL-09999-12-4464 06.27.12 0 33,240 0 

Southern Iowa Council of 

Governments and Affiliate ATL-09999-12-4444 05.03.12 138,710 0 0 

National Institute of Standards and Technology 

Chevron Energy Technology 

Company ATL-09999-12-4371 07.18.12 0 629,115 49,137 

ELSXI Corporation ATL-09999-12-3842 07.27.12 0 16,532 0 

Konarka Technologies Inc. ATL-09999-12-4566 07.26.12 0 144,717 0 

Pranalytica Inc. ATL-09999-12-4108 08.02.12 0 46,239 0 

SC Solutions Inc. ATL-09999-12-4570 07.27.12 0 30,101 0 

Velcura Therapeutics Inc. ATL-09999-12-4106 08.02.12 0 152,945 0 

Velcura Therapeutics Inc. ATL-09999-12-4107 08.02.12 0 88,769 0 

XRadia Inc. ATL-09999-12-4586 07.31.12 0 261,300 261,300 

XRadia Inc. ATL-09999-12-4547 07.31.12 0 204,416 0 

National Oceanic and Atmospheric Administration 

Nevada Hospital Association Inc. 

and Affiliates ATL-09999-12-4553 08.30.12 0 12,624 0 

New Jersey Sea Grant Consortium ATL-09999-12-4554 08.30.12 0 15,787 0 

State of Texas ATL-09999-12-4485 05.23.12 0 20,648 0 

State of Washington ATL-09999-12-4495 06.27.12 0 283,503 283,503 

National Telecommunications and Information Administration 

Silver Star Telephone Company, 

Inc. ATL-09999-12-4310 05.04.12 0 10,433 0 

Silver Star Telephone Company, 

Inc. ATL-09999-12-4311 05.04.12 0 21,799 0 

Virgin Islands Public Finance 

Authority ATL-09999-12-4498 08.03.12 0 0 0 
Statistical Data 49 

TABLE 8. AUDITS UNRESOLVED FOR MORE THAN 6 MONTHS 

Census Bureau Computer & High Tech Management, Inc. 

In our September 2005 Semiannual Report, we reported the results of 

audits of 2 of the 21 task orders for IT services that Computer & High 

Tech Management, Inc., was providing to Census. We sought to determine 

whether the firm had complied with contract terms and conditions 

and federal regulations and had billed Census for work performed in 

accordance with specifications of the task order. We found that the firm 

failed to comply with numerous contract and federal requirements, which 

caused us to question more than $10.7 million in direct labor and other 

reimbursable costs. We have suspended audit resolution on these two 

audits pursuant to an agreement with Census. 

National Institute 

of Standards 

and Technology 

Manufacturing Extension Partnership Program 

NIST has not reached resolution on findings and questioned costs 

identified in OIG audit reports of the Hollings Manufacturing Extension 

Partnership program in California. We issued our audit report covering 

California Manufacturing Technology Consulting in July 2010. We have 

reported the findings and questioned costs contained in this report as 

unresolved in previous Semiannual Reports. NIST intends to resolve this 

audit by January 31, 2013. 

National Oceanic 

and Atmospheric 

Administration 

Alaska Eskimo Whaling Commission 

As reported in our March 2009 Semiannual Report, a single audit review 

of this NOAA grant questioned costs totaling $66,353 in expenditures 

that were not adequately documented. We have suspended audit 

resolution on this grant audit pursuant to an agreement with NOAA. 
50 Office of Inspector General | Semiannual Report to Congress | September 2012 

REPORTING REQUIREMENTS 

The Inspector General Act of 1978, as amended, specifies reporting requirements for 

semiannual reports. The requirements are listed below and indexed to the applicable pages of 

this report. 

Section Topic Page 

4(a)(2) Review of Legislation and Regulations 50 

5(a)(1) Significant Problems, Abuses, and Deficiencies 6-35 

5(a)(2) Significant Recommendations for Corrective Action 6-35 

5(a)(3) Prior Significant Recommendations Unimplemented 50 

5(a)(4) Matters Referred to Prosecutorial Authorities 40 

5(a)(5) and 6(b)(2) Information or Assistance Refused 51 

5(a)(6) Listing of Audit Reports 45-46 

5(a)(7) Summary of Significant Reports 6-35 

5(a)(8) Audit Reports—Questioned Costs 43 

5(a)(9) Audit Reports—Funds to Be Put to Better Use 44 

5(a)(10) Prior Audit Reports Unresolved 51 

5(a)(11) Significant Revised Management Decisions 51 

5(a)(12) Significant Management Decisions with Which OIG Disagreed 51 

5(a)(13) Results of Peer Review 51 

SECTION 4(a)(2): REVIEW OF LEGISLATION AND REGULATIONS 

This section requires the inspector general of each agency to review existing and proposed 

legislation and regulations relating to that agency’s programs and operations. Based on this 

review, the inspector general is required to make recommendations in the semiannual report 

concerning the impact of such legislation or regulations on (1) the economy and efficiency of 

the management of programs and operations administered or financed by the agency or (2) 

the prevention and detection of fraud and abuse in those programs and operations. Comments 

concerning legislative and regulatory initiatives affecting Commerce programs are discussed, as 

appropriate, in relevant sections of the report. 

SECTION 5( a)(3): PRIOR SIGNIFICANT RECOMMENDATIONS UNIMPLEMENTED 

This section requires identification of each significant recommendation described in previous 

semiannual reports for which corrective action has not been completed. Section 5(b) requires 

that the Secretary transmit to Congress statistical tables showing the number and value of audit 

reports for which no final action has been taken, plus an explanation of why recommended action 

has not occurred, except when the management decision was made within the preceding year. 

However, information on the status of any audit recommendations can be obtained through OIG 

upon request. 
Reporting Requirements 51 

SECTIONS 5(a)(5) AND 6(b)(2): INFORMATION OR ASSISTANCE REFUSED 

These sections require a summary of each report to the Secretary when access, information, 

or assistance has been unreasonably refused or not provided. There were no reports to the 

Secretary during this semiannual period. 

SECTION 5(a)(10): PRIOR AUDIT REPORTS UNRESOLVED 

This section requires (1) a summary of each audit report issued before the beginning of the 

reporting period for which no management decision has been made by the end of the reporting 

period (including the date and title of each such report); (2) an explanation of why a decision has 

not been made; and (3) a statement concerning the desired timetable for delivering a decision 

on each such report. There are two Census, one NIST, and one NOAA reports more than 6 

months old for which no management decision has been made. 

SECTION 5(a)(11): SIGNIFICANT REVISED MANAGEMENT DECISIONS 

This section requires an explanation of the reasons for any significant revision to a management 

decision made during the reporting period. Department Administrative Order 213-5, Audit 

Resolution and Follow-up, provides procedures for revising a management decision. For 

financial assistance audits, OIG must concur with any decision that would change the audit 

resolution proposal in response to an appeal by the recipient. There are two appeals this period. 

SECTION 5(a)(12): SIGNIFICANT MANAGEMENT DECISIONS WITH WHICH OIG 

DISAGREED 

This section requires information concerning any significant management decision with which 

the inspector general disagrees. Department Administrative Order 213-5 provides procedures 

for elevating unresolved audit recommendations to higher levels of Department and OIG 

management, including their consideration by an Audit Resolution Council. During this period, no 

audit issues were referred. 

SECTION 5(a)(13): RESULTS OF PEER REVIEW 

The most recent peer review of the Office of Audit and Evaluation was conducted in 2012 by 

the Office of Personnel Management (OPM) Office of Inspector General. OPM OIG’s System 

Review Report of our audit operations is available on our website. We received a pass rating, the 

highest available rating. We are implementing all of OPM OIG’s recommendations for process 

and policy improvements. 

In 2012, we conducted our latest peer review, which examined the National Aeronautics and 

Space Administration (NASA) OIG’s audit operations. NASA’s OIG has informed us that it is 

implementing the recommendation we made in our review. 

The most recent peer review of the Office of Investigations was conducted in 2011 by the Office 

of Personnel Management’s OIG. We received a compliant rating. The final report of this peer 

review was issued on April 30, 2012. 
 

 

 

 

 

 

 

52 

CCI 

Office of Inspector General | Semiannual Report to Congress | September 2012 

ACRONYMS AND ABBREVIATIONS
 

ACS American Community Survey 

AEWC Alaska Eskimo Whaling Commission 

AFF Asset Forfeiture Fund 

AIA America Invents Act of 2011 

ASAP Automated Standard Application for 

Payment 

ATP Advanced Technology Program 

BayWEB San Francisco Bay Area Wireless 

 Enhanced Broadband 

BEA Bureau of Economic Analysis 

BIS Bureau of Industry and Security 

BPAI Board of Patent Appeals and 

Interferences 

BTOP	 Broadband Technology Opportunities 

Program 

Comprehensive Community 

Infrastructure 

COTR contracting officer’s technical 

 representative 

CPAF cost-plus-award-fee 

CPAT cost-plus-award-term 

CPEX Census Program Evaluation and 

Experiments 

CS Commercial Service (ITA) 

DOJ Department of Justice 

EDA Economic Development Administration 

ESA Economics and Statistics Administration 

FAR Federal Acquisition Regulation 

FBI Federal Bureau of Investigations 

FISMA Federal Information Security 

Management Act of 2002 

FMC Fishery Management Council 

FY fiscal year 

GAO Government Accountability Office 

GOES Geostationary Operational Environmental 

 Satellite 

GOES-R Geostationary Operational Environmental 

 Satellite-R series 

IRS Internal Revenue Service 

IT information technology 

ITA 

JPSS 

MAF/TIGER 

MEP 

MTdb

NASA 

NESDIS 

NIST 

NOAA 

NPP 

NTIA 

NWS 

OIG 

OLE 

OHRM 

OMB 

OPM 

ORCA 

PCC 

PSIC 

SBA 

SCBA 

SOP 

T&M/LH 

TAAC 

TIP 

USEAC 

USPTO 

International Trade Administration 

Joint Polar Satellite System 

Master Address File/Topologically 

Integrated Geographic Encoding and 

Referencing 

Manufacturing Extension Partnership 

 MAF/TIGER database 

National Aeronautics and Space 

Administration 

National Environmental Satellite, Data, 

and Information Service 

National Institute of Standards and 

 Technology 

National Oceanic and Atmospheric 

Administration 

National Polar-orbiting Partnership
 

National Telecommunications and 


 Information Administration 


National Weather Service (NOAA)
 

Office of Inspector General 


Office of Law Enforcement (NOAA)
 

Office of Human Resources 


 Management (Commerce)
 

Office of Management and Budget 


Office of Personnel Management
 

On-Line Representations and 


 Certifications Application
 

Public Computing Centers
 

Public Safety Interoperable 


Communications
 

Sustainable Broadband Adoption
 

Second Chance Body Armor
 

standard operating procedure
 

Time-and-Materials and Labor-Hour
 

Trade Adjustment Assistance Center 


 (EDA)
 

Technology Innovation Program
 

U.S. Export Assistance Center (ITA) 

U.S. Patent and Trademark Office 
U.S. Department of Commerce 

Office of Inspector General 

1401 Constitution Avenue, NW 

Washington, DC 20230 

www.oig.doc.gov 

OUR MISSION 

To improve the programs and operations of the 

Department of Commerce through independent 

and objective oversight.